UNG.L Regulatory News (UNG)

THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, SOUTH AFRICA, THE REPUBLIC OF IRELAND OR AUSTRALIA OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

AIM: UNG

UNIVERSE GROUP PLC

("Universe", the "Company" or the "Group")

Proposed Placing and Issue of Loan Notes

The Board of Universe, which develops and supplies leading payment and on-line loyalty systems, is pleased to announce proposals for a Fundraising consisting of the issue of new Ordinary Shares to raise gross proceeds of £1.675m and the issuance of Loan Notes to raise a further £0.2m, the latter subject to execution of satisfactory security documentation.

Further details of the Proposals are set out in a circular, convening the Extraordinary General Meeting, which will be sent to Shareholders today ("Circular") and will shortly be available on the Company's website at www.universe-group.co.uk.

Highlights:

·; £1.675m proposed to be raised by way of a Placing of 72,826,087 New Ordinary Shares at 2.3 pence per share (being a discount of 12.4% to the closing mid-market price on 23 July 2012 of 2.625p), representing 38.8% of the Enlarged Share Capital

·; Net proceeds of the Fundraising will be invested across growth opportunities and development projects in the Group's core business and allow existing cash resources to be used in the repayment of existing bank loans and loans from certain of the Directors

·; It is currently expected that funds managed by Downing LLP and/or any other subscribers will subscribe for the Loan Notes as soon as practicable following completion of the Placing

·; A Share Capital Reorganisation is proposed in order to enable the Placing to be effected

·; Placing and Share Capital Reorganisation subject to approval of Shareholders at an EGM to be held at finnCap's offices at 10.00 a.m. on Thursday 16 August 2012

·; Admission of the New Ordinary Shares expected to be effective from 17 August 2012

Stephen McLeod, CEO of Universe, commented,

"This Fundraising will strengthen the Group's balance sheet and enable us to develop Universe's growth opportunities. As we have previously reported, a major focus for the Group this year is the completion of our product enhancement programme and our new funds will assist with this."

An extract from the Circular is included below. Unless otherwise stated, terms and expressions defined in the Circular have the same meaning in this announcement.

Enquiries:

Disclaimer

finnCap Ltd, which is authorised and regulated by the Financial Services Authority, is acting as nominated and financial adviser to the Company in connection with the matters described in this announcement. finnCap Ltd will not be responsible to anyone other than the Company for providing the protections afforded to clients of finnCap Ltd or for advising any other person on the Fundraising or any other arrangements described in this announcement. finnCap Ltd has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by finnCap Ltd for the accuracy of any information or opinions contained in this announcement or for the omission of any information.

This announcement contains a number of forward looking statements relating to the Universe Group with respect to, amongst others, the following: financial conditions; results of operations; the business of the Group; future benefits of the Placing; and management plans and objectives. The Company considers any statements that are not historical facts to be "forward looking statements". They relate to events and trends that are subject to risks, uncertainties and assumptions that could cause the actual results and financial position of the Group to differ materially from the information presented in the relevant forward looking statement. When used in this announcement, the words "estimate"; "project"; "intend"; "aim"; "anticipate"; "believe"; "expect"; "should" and similar expressions, as they relate to the Group or management of it, are intended to identify such forward looking statements. Shareholders are cautioned not to place undue reliance on these forward looking statements which speak only as at the date of this announcement. The Company does not undertake any obligation to update publicly or revise any of the forward looking statements whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws, the AIM Rules or other regulations.

This announcement does not constitute an offer to buy or subscribe for, or the solicitation of an offer to buy or subscribe for, Placing Shares in any jurisdiction in which such offer or solicitation is unlawful. This announcement has not been examined or approved by the Financial Services Authority or the London Stock Exchange or any other regulatory authority. The Placing Shares have not been, and will not be, registered under the United States Securities Act of 1933 (as amended) or under the securities laws of any state of the United States nor do they qualify for distribution under any of the relevant securities laws of Australia, Canada, Japan, South Africa or the Republic of Ireland. Accordingly, the Placing Shares may not, directly or indirectly, be offered, sold or taken up, delivered or transferred in or into the United States, Australia, Canada, Japan, South Africa, the Republic of Ireland or any other territory outside the United Kingdom. The distribution of the announcement outside the United Kingdom may be restricted by law and therefore persons outside the United Kingdom into whose possession this announcement has come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws or regulations of such jurisdictions.

The following text has been extracted from the Circular:

1. Introduction

The Board of Universe today announced, inter alia, a proposed placing of 72,826,087 New Ordinary Shares at 2.3 pence per share to raise £1.675m (approximately £1.507m net of expenses). Additionally the Company will issue the Loan Notes to funds managed by Downing LLP, an existing Shareholder, and/or any other subscriber(s) in the near future to raise a further £0.2m subject to the execution of satisfactory security documentation. The Placing and the issue of the Loan Notes are intended to allow the Company to invest in growth opportunities across its core business and to strengthen the Company's balance sheet.

The principal terms of the Placing and the Loan Note Instrument are described in more detail in paragraphs 2 and 3 below respectively and details of the proposed Share Capital Reorganisation, required to facilitate the Placing, are set out in paragraph 7.

Shareholders should note that the Placing is conditional, inter alia, upon the Resolutions being passed by the requisite majority at the Extraordinary General Meeting and that the proposed issue of the Loan Notes will in turn only take place following completion of the Placing. The Placing is not conditional on the issue of the Loan Notes. If the Resolutions are not passed by the requisite majority, the Placing Agreement will not become unconditional in all respects and neither the Placing nor the issue of the Loan Notes will proceed. Accordingly, you will find set out at the end of the Circular a notice convening an Extraordinary General Meeting to be held at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ at 10.00 a.m. on 16 August 2012.

The purpose of the Circular is to outline the background to and reasons for the Fundraising and Share Capital Reorganisation and to explain why the Board considers the Fundraising and Share Capital Reorganisation to be in the best interests of the Universe Group and Shareholders as a whole.

2. Reasons for and further details of the Placing

The Company is proposing to raise £1.675m (approximately £1.507m net of expenses) by way of a placing of the Placing Shares. The Placing Price of 2.3 pence per Placing Share represents a discount of approximately 12.4 per cent. to the Closing Price of 2.625 pence per Existing Ordinary Share on 23 July 2012 (being the last Business Day prior to the announcement of the Fundraising). finnCap, as agent for the Company, has agreed to use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price. The Placing Shares will represent approximately 38.8 per cent. of the Enlarged Share Capital.

In addition to the Placing, the Company expects to issue the Loan Notes in due course. Further details of the terms on which the Loan Notes will be issued are set out in paragraph 3 below.

The Board, having been advised by finnCap, considers that it is in the best interests of the Company and Shareholders as a whole for the Group's ongoing capital requirements to be funded by the Placing and the Loan Note issue. In providing its advice, finnCap has relied upon the Board's commercial assessment of the Fundraising. The Board believes that the additional costs that would be incurred, both financially and in terms of management time, if the Company were to offer all Shareholders the opportunity to acquire new shares in the Company (for example, via an open offer or a rights issue), are such that a non-pre-emptive placing with a limited number of institutional and other investors (including each of the Directors) is a more appropriate method of raising finance in this instance.

The Company will therefore seek approval from Shareholders at the Extraordinary General Meeting to raise finance by means of issuing the Placing Shares without pre-emption for existing Shareholders.

The Placing is conditional upon:

(i) the Resolutions being passed without amendment;

(ii) the Placing Agreement becoming unconditional in all respects (save for Admission) and not having been terminated by finnCap; and

(iii) admission of the New Ordinary Shares to trading becoming effective by not later than 8.00 a.m. on 17 August 2012 (or such later time and/or date as the Company and finnCap may agree, not being later than 8.00 a.m. on 7 September 2012).

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. No application has been or is being made for the Existing Ordinary Shares or New Ordinary Shares to be admitted to any other recognised investment exchange. Subject to, inter alia, the Resolutions being passed by the requisite majority at the Extraordinary General Meeting, it is expected that Admission will become effective and that trading in the Enlarged Share Capital on the London Stock Exchange will commence at 8.00 a.m. on 17 August 2012.

The Existing Ordinary Shares are already admitted to CREST. Accordingly, no further application for admission to CREST is required for the New Ordinary Shares. All such shares, when issued and fully paid, may be held and transferred by means of CREST.

The Placing Shares will, when issued fully-paid and upon Admission, rank pari passu in all respects with the New Ordinary Shares and for all dividends and other distributions declared, paid or made in respect of the New Ordinary Shares after Admission.

It is expected that the Placing Shares will be delivered in CREST on 17 August 2012 and that (where appropriate) share certificates for those Placing Shares to be held in certificated form will be despatched by first class post by 31 August 2012.

3. Terms of issue of the Loan Notes

While there is no legal obligation on it to do so, it is currently anticipated that funds managed by Downing LLP and/or any other subscriber(s) will subscribe for the Loan Notes as soon as practicable following completion of the Placing.

The Loan Notes will be capable of being redeemed in cash after five years from their date of issue but the Company will be permitted, in its discretion, to repay with effect from the second anniversary of their date of issue up to £150,000 in aggregate of the principal amount. Interest will be payable at a rate of 9.5 per cent. per annum, quarterly in arrears, until such time as the Loan Notes are redeemed in full. The Loan Notes will be non-transferable without the prior written consent of the Company. Repayment of the Loan Notes will be secured by way of second-ranking fixed and floating charges to be agreed by Downing LLP and the Company.

4. Use of proceeds

Amounts raised in the Fundraising will allow the Group to invest across growth opportunities and development projects in its core "Solutions" division, including initiatives to enhance existing capabilities in payment and loyalty transaction processing and associated improvements in the Group's data centre capabilities. The Fundraising will also allow existing cash resources, supported by a restructuring of the Company's asset financing arrangements, to be used in the repayment of existing bank loans and loans from certain of the Directors.

5. Placing Agreement

Pursuant to the Placing Agreement, finnCap, as agent for the Company, has conditionally agreed, subject to the fulfilment of certain conditions and on the terms set out therein, to use its reasonable endeavours to procure subscribers for the Placing Shares. The Placing is not being underwritten.

The Company has agreed to pay to finnCap upon Admission a placing fee and a corporate finance fee, plus any VAT thereon. The Company will also pay all other costs and expenses of, or in connection with, the Fundraising.

The Placing Agreement contains customary warranties and indemnities given by the Company in favour of finnCap.

The obligations of finnCap under the Placing Agreement are conditional upon, inter alia:

● the passing of the Resolutions;

● the Placing Agreement not having been terminated in accordance with its terms prior to Admission; and

● Admission taking place by 8.00 a.m. on 17 August 2012 (or such later time and/or date as finnCap and the Company may agree, not being later than 8.00 a.m. on 7 September 2012).

finnCap is entitled to terminate the Placing Agreement prior to Admission, principally in the event of a breach of the Placing Agreement which finnCap considers to be material in the context of the Placing as a whole or of any of the warranties contained in it or on the occurrence of certain external events beyond the Company's control.

6. Current trading and prospects and future Group strategy

Over the past 18 months, the Group has been restructured and reorganised to pursue a new three year growth plan. Progress has been achieved in line with this growth plan and the Directors believe that the restructuring of the Company's balance sheet which the Fundraising enables, and the extra capital that it provides, will allow the Company to continue to pursue new opportunities for growth.

While unrelated to the decision to raise further capital, and as part of their original restructuring plan, the Directors are exploring a range of options in respect of the Group's HTEC Contract Electronics Manufacturing business.

Trading during the current financial year is ahead of the comparable period last year and in line with market expectations.

7. Share Capital Reorganisation

The Act prohibits the Company from issuing ordinary shares at a price below their nominal value. The price at which the Company has been able to raise additional capital is less than the current nominal value of the Existing Ordinary Shares. Accordingly, it will be necessary to undertake the Share Capital Reorganisation prior to completion of the Placing.

Immediately prior to the Extraordinary General Meeting, the Company will have 114,704,539 Existing Ordinary Shares in issue. Resolution 1 to be proposed at the Extraordinary General Meeting proposes that each of the Existing Ordinary Shares be split into one New Ordinary Share of 1 penny and one Deferred Share of 4 pence, such Deferred Shares having the rights attached to them in the articles of association of the Company to be amended pursuant to Resolution 3.

The New Ordinary Shares of 1 penny each will continue to carry the same rights as are attached to the Existing Ordinary Shares (save for the reduction in nominal value). The Deferred Shares will be transferable only with the consent of the Company and will not be admitted to trading on AIM (or any other investment exchange). No certificates will be issued in respect of the Deferred Shares. The Deferred Shares are effectively valueless as they will not carry voting rights and will carry no rights to participate in the profits or capital of the Company.

The practical effect of this change, if implemented, will be that each Shareholder will receive the same number of New Ordinary Shares as they hold Existing Ordinary Shares, without diminution in rights. As the Share Capital Reorganisation will amount to a disqualifying event pursuant to the legislation concerning the operation of enterprise management incentive schemes, it is proposed that new share option agreements be entered into with each of the relevant Directors and senior management following completion of the Placing at the same exercise price and otherwise on similar terms to those agreements currently in place and described in the latest annual report and accounts of the Company save that the three year vesting periods described therein will be shortened so as to allow for exercise from the respective dates on which the current options would otherwise have become exercisable.

Only the Placing Shares and, in place of the Existing Ordinary Shares, the New Ordinary Shares will be traded on AIM and application will be made to the London Stock Exchange for the Placing Shares and the New Ordinary Shares to be admitted to trading in place of the Existing Ordinary Shares with effect from 8.00 a.m. on 17 August 2012.

Conditional upon the passing of Resolutions 1 and 3, the Company and the holders of the Deferred Shares will have the ability, subject to compliance with any legal requirements, to enter into a Repurchase Agreement whereby the holders of the Deferred Shares will agree to transfer (without receiving any payment therefore, in accordance with the amendments proposed to be made to the articles of association of the Company by Resolution 3) all of the Deferred Shares held by them to a person designated by the Board. That designated person will then agree to the Company repurchasing all the Deferred Shares to be held by him for one penny in aggregate and, following such repurchase, all of the Deferred Shares will be cancelled. It is the intention of the Board that any such repurchase of the Deferred Shares be financed out of the proceeds of issue of the Placing Shares. According to the class rights of the Deferred Shares, any member of the Board may be designated the person who should sign a Repurchase Agreement on behalf of the holders of Deferred Shares.

8. EIS and VCT

HM Revenue & Customs has given provisional approval that relevant investments in Placing Shares should qualify for relief under VCT and EIS legislation. However no guarantee or other assurance is given that the activities of the Group will be such as to attract or retain any qualifying status for VCT and EIS purposes. Any person who is in doubt as to their tax position should consult their professional taxation adviser.

9. Extraordinary General Meeting

The Notice convening the Extraordinary General Meeting to be held at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ at 10.00 a.m. on 16 August 2012 is set out at the end of the Circular. At the Extraordinary General Meeting the following resolutions will be proposed:

● Resolution 1, which will be proposed as an ordinary resolution and is subject to the passing of Resolutions 3 and 5, seeks approval for the sub-division of each Existing Ordinary Share into one New Ordinary Share of 1 pence each and one Deferred Share of 4 pence each.

● Resolution 2, which will also be proposed as an ordinary resolution, proposes that, in substitution for and to the exclusion of the authority conferred by an ordinary resolution of the Company passed on 26 June 2012, the Directors be authorised to allot shares in the Company or to grant rights to subscribe for or convert any securities into shares in the Company up to a maximum nominal amount of £1,353,363, representing, in aggregate, one-third of the nominal value of the Enlarged Share Capital and the nominal value of the Placing Shares. This authority will expire at the conclusion of the next annual general meeting of the Company to be held after the passing of the resolution.

● Resolution 3, which will be proposed as a special resolution and is subject to the passing of Resolution 1, seeks approval for certain amendments to the articles of association of the Company necessary to reflect the rights which will attach to the Deferred Shares and various other administrative matters (including that a general meeting of Shareholders may now (where permitted by the Act) be convened by not less than 14 clear days' notice).

● Resolution 4 will also be proposed as a special resolution and is subject to the passing of Resolutions 1, 2 and 3. Resolution 4 proposes that, in substitution for and to the exclusion of the authority conferred by a special resolution of the Company passed on 26 June 2012, the Directors be empowered to disapply pre-emption rights in relation to, inter alia, the allotment of the Placing Shares in connection with the Placing. This authority will expire at the conclusion of the next annual genera l meeting of the Company to be held after the passing of the resolution.

● Resolution 5, which will also be proposed as a special resolution and is subject to the passing of Resolutions 1 and 3, seeks approval for the Company to enter into a contract to re-purchase the Deferred Shares for the aggregate sum of 1 penny.

The purpose of seeking the approval of Shareholders to the taking of authority and the disapplication of pre-emption rights in addition to that required for the Placing is to allow the Directors to have available to them for allotment following the Placing a margin of authorised but unissued share capital equivalent to that approved at the annual general meeting of the Company held on 26 June 2012. While the Directors have no present intention of exercising the additional authorities proposed to be conferred by Resolutions 2 and 4, they believe that the granting of such authorities will preserve the Board's flexibility to take advantage of further opportunities if and when they arise.

10. Action to be taken

A Form of Proxy is enclosed for use at the Extraordinary General Meeting by Shareholders holding Existing Ordinary Shares in certificated form. Whether or not you intend to be present at the meeting, you are requested to complete, sign and return the Form of Proxy in accordance with the instructions printed on it to Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham BR3 4TU, as soon as possible but, in any event, so as to be received no later than 10.00 a.m. on 14 August 2012, being 48 hours before the time of the Extraordinary General Meeting. The completion and return of a Form of Proxy will not prevent you from attending the Extraordinary General Meeting and voting in person if you wish to do so.

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Extraordinary General Meeting and any adjournment(s) of such meeting by using the procedures described in the CREST Manual.

11. Related party transactions

The Directors and Ennismore have agreed to subscribe for Placing Shares pursuant to the Placing. This participation in the Placing by each of the Directors, as set out below, and by Ennismore (as a substantial shareholder in the Company) constitute related party transactions pursuant to the AIM Rules. finnCap, as nominated adviser to the Company, considers that participation by the Directors in the Placing is fair and reasonable insofar as Shareholders are concerned and, separately, the Directors, having consulted with finnCap, consider that participation by Ennismore is fair and reasonable insofar as Shareholders are concerned.

12. Recommendation

The Directors believe that the Proposals are in the best interests of the Company and Shareholders as a whole and accordingly, the Directors are unanimously recommending that you vote in favour of all Resolutions at the Extraordinary General Meeting, as they have undertaken to do in respect of the 10,396,120 Existing Ordinary Shares held, directly or indirectly, by them, representing approximately 9.1 per cent. of the Existing Share Capital.

In addition, undertakings to vote in favour of the Resolutions have been received by Universe from a number of Shareholders amounting, in aggregate, to 47,021,779 Existing Ordinary Shares, representing approximately 41.0 per cent. of the Existing Share Capital. Accordingly, undertakings to vote in favour of the Resolutions have been received from Shareholders holding, in aggregate, 57,417,899 Existing Ordinary Shares representing approximately 50.1 per cent. of the Existing Share Capital.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS(1)

(1) Each of the times and dates set out in the above timetable and mentioned throughout this announcement are London times unless otherwise stated, are based on current expectations and subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement through a Regulatory Information Service. All events in the above timetable following the Extraordinary General Meeting are conditional on the approval by Shareholders of the Resolutions as set out in the Notice of Extraordinary General Meeting which appears at the end of this announcement.

ADMISSION AND PLACING STATISTICS

(2) Assumes that no Existing Ordinary Shares or New Ordinary Shares are issued between the date of this announcement and Admission.

The following definitions apply throughout this announcement, except where the context requires otherwise:

All references to legislation in this announcement are to the legislation of England and Wales unless the contrary is indicated. A reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.